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January 2020 | Strictly Private & Confidential

Republic of ParaguayOpen | Competitive | Vibrant

Disclaimer

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2

Summary Terms of the Offering

Issuer Republic of Paraguay (“Paraguay”)

Expected Ratings Ba1 / BB / BB+ (Moody’s/S&P/Fitch)

Format 144A / RegS

Currency United States Dollar (“USD”)

Reopening Security 5.400% Notes due 2050

Reopening Size US$450 million

Current Size US$500 million

Average Life 29 Years

Amortization Soft bullet (Three equal installments in 2048, 2049 and 2050)

Optional Redemption Make-Whole Call | 6-month Par Call

Listing Luxembourg Stock Exchange / Euro MTF

Use of Proceeds

(a) Finance infrastructure and capital expenditures,

(b) refinance a portion of its outstanding debt and

(c) honor funding obligations to certain multilateral organizations

Denominations US$200,000 x US$1,000

Governing Law State of New York

Joint Bookrunners Goldman Sachs / Itau BBA / Morgan Stanley (B&D)

3

Key facts: Republic of Paraguay

Paraguay is a dynamic, fast-growing economy with a rapidly improving credit profile

Paraguay

Sovereign credit rating Moody's: Ba1 / Stable

S&P: BB /Stable

Fitch: BB+ / Stable

Geography Capital City: Asunción

Population 7.05 million (2018)

Over half of the population lives in urban

areas in the eastern portion of the country

Currency Paraguayan Guaraní,₲

Exchange Rate G.6,453.1 per U.S.

dollar (YE 2019)

GDP Nominal GDP: 39 USD Bn (2019)

Real GDP Growth: 0.2%(2019)

GDP per capita: 5,404 USD (2019)

President Mario Abdo Benítez (Coloradoparty)

Start of five-year term on August 15,2018

Dec-0

6

Dec-0

7

Dec-0

8

Dec-0

9

Dec-1

0

Dec-1

1

Dec-1

2

Dec-1

3

Dec-1

4

Dec-1

5

Dec-1

6

Dec-1

7

Dec-1

8Paraguay’s Credit Ratings, on its path to Investment Grade Key UpgradeDrivers

BBB-/Baa3

BB+/Ba1

BB/Ba2

BB-/Ba3

B+/B1

B/B2

B-/B3

CCC/Caa1 Moody's

Investment Grade

Resilience to

externalshocks

Credit metrics continued to improve despite

economic problems in its key neighbor

countries, Brazil andArgentina

Growth

Performance

Remarkable growth performance combined with

increasing pace of economicdiversification

Macroeconomic

discipline

Track record of Fiscal Prudence, with

institutionalized fiscal discipline

Source: Ministry of Finance of Paraguay, Central Bank of Paraguay, Standard and Poor's, Moody's December 2019, Fitch December 2019, Fitch Paraguay's full rating report , December 2019

4

Fitch

S&P

Dec-1

9

Paraguay has strengthened its four macro pillars

Solid Financial System

Non Performing Loans (%)

Fiscal Balance

Fiscal Surplus/Deficit as a % of GDP

Price Stability

Inflation, annual year-end growth rate (%)

Balanced External Account

Current Account Balance as % of GDP (Through Sep-2019)

Source: Ministry of Finance of Paraguay, Central Bank of Paraguay, IMF.

2,8

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

(2,8)%

(6,0)

(4,0)

(2,0)

0,0

2,0

4,0

6,0

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

2,9%

0,0

2,0

4,0

6,0

8,0

10,0

12,0

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

oct.

-201

9

(1,2)%(2,0)

(1,0)

0,0

1,0

2,0

3,0

4,0

5,0

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

3Q

201

9

5

Investment Highlights

Source: Ministry of Finance of Paraguay, Central Bank of Paraguay

Robust export sector: global leader in grain, livestock

and electricity exports

Government institutions that are focused on improving

effectiveness, with a strong forward looking stance

Favorable medium term outlook for the economy

Prudent macroeconomic policy with historical track

record of above average and resilient growth

3

4

5

2

1

Disciplined government committed to low

government debt and structural reforms

6

3,4

2,1

2,7

3,9 3,9

2,62,4

4,2

ParaguayBB/Ba1/

BB+

PortugalBBB/Baa3/

BBB

ColombiaBBB-/Baa2/

BBB

CyprusBBB-/Ba2/

BBB-

PanamaBBB+/Baa1/

BBB

Moody'sMedian

Baa1 - Baa3

SouthAmericaMedian

Stands out among investment grade peers

High growth rate driven by exports and private consumptionReal GDP Growth %, year-end 2018

Commitment to low government debt, apparent in peer comparisonsCentral Government Debt as % of GDP, year-end 2018

Paraguay’s fiscal discipline in line with peersFiscal Balance as % of GDP, year-end 2018

Global leader in its exported goods, which ensures an externalbufferCurrent Account Balance as % of GDP, year-end 2018

Source: Ministry of Finance of Paraguay, Central Bank of Paraguay, IMF world Economic Outlook April 2019, All Moody's rated Baa1-Baa3 peers extracted from:

https://tradingeconomics.com/country-list/rating

Paraguay average growth for 2014-18

(2,8)%(2,2)% (2,0)%

0,7%

2,9%

(2,3)%

(3,9)%

ParaguayBB/Ba1/

BB+

ColombiaBBB-/Baa2/

BBB

PanamaBBB+/Baa1/

BBB

PortugalBBB/Baa3/

BBB

CyprusBBB-/Ba2/

BBB-

Moody'sMedian

Baa1 - Baa3

SouthAmericaMedian

Dec.-2019

22,6%

39,4%

50,5%

102,5%

121,4%

55,1% 55,5%

ParaguayBB/Ba1/

BB+

PanamaBBB+/Baa1/

BBB

ColombiaBBB-/Baa2/

BBB

CyprusBBB-/Ba2/

BBB-

PortugalBBB/Baa3/

BBB

Moody'sMedian

Baa1 - Baa3

SouthAmericaMedian

(2018) 19.7%. As of 31-Oct-2019

(0,2)

(8,5)

(5,6)

(3,8)

(0,6)

(2,5)(2,2)

ParaguayBB/Ba1/

BB+

PanamaBBB+/Baa1/

BBB

CyprusBBB-/Ba2/

BBB-

ColombiaBBB-/Baa2/

BBB

PortugalBBB/Baa3/

BBB

Moody'sMedian

Baa1 - Baa3

SouthAmericaMedian

7

A debt profile that is conservative and supportive of growth

Debt Service ProfileTotal debt increase aligned with Paraguay's economic growth, yet still the

lowest in itscategory…

Government Debt as % of GDP (%), October 31, 2019

A diversified domestic and external funding profile

Total Government Debt in USD Bn, July 31, 2019

Source: Ministry of Finance of Paraguay.

15,1%17,3% 18,2% 19.7%

22,6%

45,0%50,7%

53,1% 57,4%

57,7%

47,1%

48,9%

49,6% 50,8%

51,1%

2015 2016 2017 2018 oct.-19

Paraguay

Latam Average*

BB Group Average*

$310,9$383,9

$422,9$457,5

$380,7

2015 2016 2017 2018 sept.-19

External Debt Service (USD million)

4,0 4,8 5,6 6,4 7,2

1,51,5

1,61,6

1,6

5,56,3

7,28,0

8,815,1%

17,3%18,2%

19,7%

22,6%

2015 2016 2017 2018 As of Oct-2019

External Public Debt Domestic Public Debt Debt as % of GDP

IDB22.9%

IBRD8.1%

CAF6.1%

Other Multilateral

4,2%Bilateral

2,9%

Bonds54.6%

Official

Creditors

Private

Creditors

8

As of Oct-2019

Mortgage GuaranteeLaw Insolvency BillLaw to Simplify Company

Formation

Steadfast implementation of key policy reforms and priorities

Source: Ministry of Finance of Paraguay

Laws referred to the National Congress

Bills about money

laundering, terrorist

financing and

organized crime

within the

framework of the

recommendations

made by the

International

Financial Action

Task Force for Latin

America (FATF)

Employment,

Competitiveness

and other Seeks to facilitate access to

funding for entrepreneurs for

investments and credit

Establishes a faster and low

cost framework for business

closure

Aims at facilitating the

recoveryof assets and cash

after a business closure

Aimed at improving the

business climate in Paraguay;

by facilitating and reducing

time and costs to opena

business

Enacted: Law 6480/2019

Paraguay is committed to enacting key policy reforms and has already promulgated laws in support of the following strategic priorities

Repeal of article 3 of Law 4673 that modifies and expands provisions for the creation of the Personal Income Tax.

Promulgated / Approved by the National Congress

Pending Approval by the National Congress

Creation of Criminal Courts of guarantees, of Criminal Enforcement, Courts of Sentence, Criminal Appeal; all specialized in Money Laundering, Drug Trafficking, Anti-kidnapping, Financing of Terrorism, Corruption and Organized Crime. Law 6379/19

Creation of the procedure for the Reception of Dissemination and Exclusion of Individuals and Legal Entities Issued by the Security Council of the United Nations Organization and modifies Law 4503/11 on the immobilization of Funds or Financial Assets. Law 6419

Modification of Law 5895/17 on the rules of transparency in the regime of Companies Incorporated by Shares. Law 6399/19 Modification of Law 5876/17 on the Administration of Seized and Commissioned Goods. Law 6396/19 Creation of the List of Final Beneficiaries of the Republic of Paraguay. Law 6446/19 Creation and typing of the Punishable Facts of Transnational Bribery. Enacted: Law 6340/19 Modification of Law 4024/10 on the Fight against Terrorism and incorporating the punishable facts of recruitment and indoctrination,

terrorist fighter abroad and apology of terrorism. Law 6408/19 Creation of the Special Procedure for the application of the Comiso, the Special Comiso, the Autonomous Comiso and the Deprivation

of Benefits and Earnings. Law 6431/19 Modification of the provisions of Law 1160/97 of the Criminal Code and Law 3440/08, and punishable facts of market manipulation

and others are created and typified. Law 6452/19

9

New Budget Law

Introduced budget-by-results

which incorporates additional

accountability to public

finances and cuts

discretionary spending

Tax Reform Reformed aimed to simplify and modernize the tax code. Law 6380/19

2015 2016 2017 2018 2019*

9.8%

8.3%

2020 Budget

Estimation

31-Oct-2019

Certain events of 2019 reduced this year’s growth forecast

The new growth forecast for 2019 was recalibrated to 0,2% after a

significant drought contracted 2018/19 agricultural production…

• Adverse climate conditions have had a

negative impact on our soy production and

electric energy production.

• Together with the fall in soy prices, Paraguay’s

agricultural sector experienced a 6.2%

decrease as of December 2019, whereas

electricity and energy experienced a decrease

of 8.0% as of December 2019.

• High rainfall was responsible for a

deceleration in the construction sector both in

the private and the public sectors.

• Construction increased by 0.5% as of

December 2019.

• Negative spillovers from the slowdown of

agriculture, livestock and construction

sectors have lowered industrial

production.

Agriculture and energy ManufacturingConstruction

Climate conditions and regional headwinds are the main reasons to recalibrate the growth forecast

Tax Pressure Observed as % of GDP (Trend)

Tax Pressure Trend

Tax pressure*As % of GDP

…which has led us to face a cyclical situation…


$40,0

$36,3 $36,3

$39,4

$41,0

$38,7

4,9%

3,1%

4,3%

5,0%

3,7%

0,2%

2014 2015 2016 2017 2018e 2019F

Nominal GDP (USD bn)Real GDP Growth, % YoY

* Accumulated 3Q 19.

10

$ 360,7 $ 454,0

$ 558,1 $ 484,6

$ 796,9

2015 2016 2017 2018 2019

Timely policies have buffered the slowdown, showing results

Source: Ministry of Finance of Paraguay (Situfin), Central Bank of Paraguay

… which, since April 2019, has translated into steady improvement in

Paraguay's monthly indicator of economic activity

YoY % monthly variation

The Paraguayan economy begins to show the first encouraging signs of improvement

• Important policy actions supporting production and trade, projects to improve business climate and reforms are

instrumental in explaining our gradual recovery of the economy

Acceleration of investments with high employment impact

Social expenditure to increaseprotections

Support to trade

and production

Public investment reached an all time high as of December2019…

Investment Expenditure in USD Millions

Average

2015-2019

$530.9

11

Source: Ministry of Finance of Paraguay (Situfin), Central Bank of Paraguay Source: Ministry of Finance of Paraguay (Situfin), Central Bank of Paraguay

-0,8

-3,0

-4,8 -5,4

-2,8-1,7

0,71,2

6,3

4,8

1,5

-6,0

-4,0

-2,0

0,0

2,0

4,0

6,0

8,0

US$ 40

Health

US$ 579Public Works

US$ 16 Agriculture

US$ 49Others

US$ 8Dwelling

US$ 30Security

US$ 35Education

With a budget structured for growth

Source: Ministry of Finance of Paraguay, Central Bank of Paraguay . *Investment refers to Net Acquisition of Non-financial Assets. 1Excludes Taxes on products

With an investment that grows at a rate of 43.5%Investment distribution USD million as of October 2019

The structural result is lower than the effectiveCentral Government Finances (% of GDP)

… while we continue to work on diversifying our economy and expand our dynamic tertiary sectorPercent of Total Real GDP by Sector 2018, only Gross value added1 excludes Taxes on products

US$ 757Central

Government

Investment

(0,9)

(0,5) (0,6) (0,6)(0.7)

(1,3)(1,1) (1,1)

(1,3)

(2.8)

2015 2016 2017 2018 2019

Operational Fiscal Balance

Global Fiscal Balance

Manufacturing 21.1%

Electricity, Water 8.7%Commerce11.7%

Household Services 4.7%

Restaurants and Hotels 2.7%

Government 9.3%

Primary 10.8%

Tertiary 49.1%

Real-estate Services 6.7%

Business Services 2.4%

Agriculture 9.1%

Transportation 4.0%

Communications 3.7%

Livestock, 2.3%

Forestry, Fishing, Mining 1.0%

Secondary 32.6 %

Construction 6.5%

Finance5.7%

Oct-2019

Oct-2019

Oct-2019

12

Source: Ministry of Finance of Paraguay (Situfin), https://www.hacienda.gov.py/situfin/

Resulting in a healthy trade balance throughout the last years

Underpinned by its competitive profile in the region

Item

Indirect TaxRate 10% 17% 21% 19%

Corporate TaxRate 10% 34% 35% 25%

Trade Weighted

average duty(%)7.0% 10.0% 14.8% 5.8%

SocialSecurity

Contribution(*)25.5% 31% 40% 32%

EnergyCost

(c$/kWh)6.6 16.8 10.8 10.2

Lowest indirect tax rate in theregion

Lowest corporate tax rate in theregion

Lowest energy costs in theregion

Second Lowest Trade Weighted averageduty

A positive trade balance A positive Trade Balance in the 2015-2019(Q3) period

Source: Ministry of Finance, including data from Central Bank of Paraguay

(*) Sum of the Total Contribution to Social Security of the employer and the employee.

$11,10 $11,98$13,40 $13,80

$9,40

$(10,31) $(9,78) $(11,52) $(12,90) $(9,00)

(0,4)%3,6% 3,1%

(0,2)% (1,2)%

2015 2016 2017 2018 2019 (Q3)

Imports (USD bn) Exports (USD bn)

Current Account as % of GDP

0,8

2,2

1,9

0,8

0,4

2015 2016 2017 2018 2019 (Q3)

Trade Balance (USD bn)

13

Sound monetary policy supported by a credible Central Bank…

Domestic interest rates have remained low to support domestic

consumptionNominal Interest Rate (%)(1)

Inflation remained well within the target band

(%)

Current inflation target band for 2018: 4.0% +/- 2.0%

High levels of International Reserves enhance stability

Source: Central Bank of Paraguay(1) Monetary Policy Interest Rate

(*) As of September 2018

$6,20$7,14

$8,15 $8,01 $8,008,5

11,4 12,09,9 11,1

2015 2016 2017 2018 2019

Total International Reserves USD bn

Reserves in Months of Imports (Months)

3.1% 3.9% 4.5% 3.2% 2.8%

2015 2016 2017 2018 2019

CPI % Change Target Band Target Inflation

5,25

4,00

3

4

5

6

7

ma

r.-1

5

jun

.-1

5

sep

t.-1

5

dic

.-15

ma

r.-1

6

jun

.-1

6

sep

t.-1

6

dic

.-16

ma

r.-1

7

jun

.-1

7

sep

t.-1

7

dic

.-17

ma

r.-1

8

jun

.-1

8

sep

t.-1

8

dic

.-18

ma

r.-1

9

jun

.-1

9

sep

t.-1

9

dic

.-19

14

... and a well capitalized financial sector

Most of the loans are concentrated among Private Domestic Banks

and branches of foreign banks (2)

Total loans in the system as of October 31, 2019 USD 17.6 bn

Recent Developments on AML / CFT in 2019

• Part of the Paraguayan Strategic Plan is to strengthened the AML /

CFTregime

• Paraguay has made it a strategic priority to enact bills that improve

AML / CFT standards.

• Nine different bills have been enacted by congress that

strengthen these systems

• These laws aim to improve transparency in the financial

system and create procedures to enforce improved

standards

• Improvement in the 2019 Basel AML Index: Paraguay has

continued its trend of improvement in the Basel AML Index,

moving up to 14 in 2019

RWA’s remain stable, but are accompanied by a decrease inROE’s

that have been in line with a supply ofloans

Return on Equity

Regulatory Capital to Risk Weighted Assets

Banks are increasingly lending more, and NPL levels are low (1)

Source: Ministry of Finance of Paraguay, Central Bank of Paraguay, Basel AML Index

$12,8$16,0 $15,0 $15,2

$17,7

1,8%

2,5%

2,8%2,7%

2,4%

2014 2015 2016 2017 2018

Total Loans USD bn

Non-Performing Loans % of Total Loans

16,2%18,0% 18,5%

17,6% 17,7%

27,8%

23,8% 24,2%22.5%

24,6%

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

2015 2016 2017 2018 31-oct.-19

Savings and Loans Cooperatives

11.9%

Financial Companies

3.7%

Direct Foreign

Subsidiaries

30.6% BNF

5.4%

Private Domestic

Local Majority

Property 47.0

Branches of

Foreign Banks

1.3%

15


Appendix

Projects with Private Financing

ROADS 2 & 7 – Duplication of 143 Km and improvement of 18 Km for US$ 507 million. The SPV “Rutas del Este” successfully allocated private bonds in the international market to finance part of the Project. The project is currently in construction phase.

BIOCEANICA ROAD PHASE I – Construction of 278 Km for US$ 443 million. 24 Km of the road was already delivered. The project is currently in construction phase.

ROAD SAN CRISTOBAL – NARANJAL – Construction of 47.2 Km for US$ 46 million. The project is currently in operative phase.


17

Pipeline of Projects with Private Financing

PPP Program in Paraguay, US$ 700 million2 projects outstand Roads 1 y 6 for US$ 250 millionParaguay Hidroway US$ 200 millionWater & Sewage US$ 250 million

Turnkey Projects Program, US$ 820 millionBioceánico Phase II US$ 472 millionElectricity distribution US$ 300 million

Traditional financing projectsIn 2019, 38 projects were approved for a total of US$ 2,300 millionThe Investment System (SNIP) received 50 projects in different stages for US$ 3,000 millionBridge in the lower Chaco US$ 150 million

Private InitiativesParaguay Hidroway US$ 120 millionFerry US$ 84 million


18

Structural Reform - Taxation


*Upon full implementation by 2023

19

New Legislation Passed to Modernize and Simplify the Tax system

EQUAL TREATMENT

JUST & FAIR RATES

COMPETITIVENESS

SIMPLIFIED CODE

MODERNIZATION

Same rules apply to all sectors, no privileges or special treatment

Each legal entity and individual will be taxed according to their capacity to pay

Simplified regimes designed to boost formalization and promote

competitiveness

Simplified text and streamlined processing to smooth settlement of taxes and

reduce collection costs

Standards based on International best practices to combat tax avoidance and

evasion

The New Law Provides

What will be done with the additional resources?

FUND FOR THE STRENGTHENING

OF INFRASTRUCTURE

AND HUMAN CAPITAL

(FOICAH)

HEALTH

0.4% of GDP

EDUCATION

0.2% of GDP

INFRASTRUCTURE

0.1% of GDP

Potential Increase in Direct Revenue Collection

0.7% of GDP = USD 300 MILLION*

USD 171 MILLION

USD 86 MILLION

USD 43 MILLION


Thank you

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